The Fed still suffer PTSD from the Nixon shock

The Federal Reserve is not an intelligence: it does not think. Individual members of the Federal Open Market Committee, however, do think. And the center of gravity of their individual thoughts now runs something like this:1980-1985 was a disaster: 3 x 6 x 0.5 = 9%-point-years of lost jobs for Americans, jobs that would not have been lost had the Federal Reserve done its proper job and kept inflation under control in the 1970s:

Says Brad.

The conclusion? We should have eased off of gold instead of the overnight shock. A chart:

This chart has the implicit deflator, the CPI and gold price. You can see that gold prices went wild, more wild than inflation, and inflation had hit 10-12% at its peak.

Nixon left a lot of paper, free floating cash when it exited the gold market.

Tell me another method, Brad.  Tell me how we can execute a gold default as a longer term Wiener process, Brownian motion over time? We cannot, Brad, because unless it is war, we cannot hold the MMT moment much longer than a couple of weeks.  Imagine, Brad, if Nixon pre-announced, told everyone to get ready. In that case we have pure hysteria among those who rely on precious government goodie.

The solution, Brad, is we have to purchase the right to coin, buy off Congress so we can ease the defaults into the monetary system with tiny little shocks asynchronously placed. Our contract with Congress needs a renewal option.

The Fed is not worrying inflation now, they have gotten over the Nixon Shock.  Now the Fed is worried that the ten year rises near 3% and Congress no longer works.  The Fed needs to keep interest payments/GDP under 3.5%, including the SS interest charges.